Zhejiang eyes PE to fund railway construction

Zhejiang province is looking at private capital to finance its massive railway construction plans, the 21st Century Business Herald reported Tuesday.

The East China province plans to invest a record 48-50 billion yuan ($7-7.3 billion) on railway construction this year, up 50 percent from 2009, a source from the Zhejiang Provincial Railway Investment Group told the paper.

The province, known for its robust private enterprises, plans to provide 10 billion yuan of the total investment, with the rest to be raised from private capital in the province.

To that end, the Zhejiang Railway founded a private fund with Bank of China Group Investment, and a presentation of the fund is in preparation, said Yu Jian'er, president of the company.

The two initiators are each to invest 1 billion yuan in the fund, and aim to raise another 3 billion yuan at the initial stage.

However, as it may take at least 20 years to see returns on railway projects, and the returns are usually less than 6 percent a year, investors are reluctant to pour money in the fund at present, sources who took part in the fund told the paper.

Zhejiang Railway is to build 24 railway projects by 2015. Total investment on these projects comes to nearly 300 billion yuan, and Zhejiang Railway is to collect 50 billion yuan on behalf of the provincial government for the projects.

China released guidelines on May 13 to further encourage private investment in a wider range of key industries, including investment on railway construction.

 

(2010-05-18 chinadaily.com.cn)